Danone sold its Earthbound Farm organic salads business last week to Taylor Farms, the French company announced. Danone, which acquired Earthbound in 2017 with its purchase of WhiteWave Foods, said the sale was part of its "portfolio management and capital allocation optimization strategy."
Founded in 1984 in California, Earthbound Farm is the largest U.S. producer of organic salads, according to Danone. Sales were about $400 million in 2018, the company said, although it didn't release financial details on the divestment.
California-based Taylor Farms said in a release it was "grateful for Danone's stewardship" of Earthbound Farm during the past two years and "for the opportunity to return ownership of this organic fresh produce leader to local roots and family ownership."
Danone is following the pattern of many CPG companies these days — divesting a brand that's outside of its core business. According to Bloomberg, Danone had been exploring a sale of Earthbound Farm since last summer, with the asking price estimated at about $500 million. WhiteWave paid $600 million for Earthbound Farm in 2014, Bloomberg said.
The deal seems to make sense for both companies. Danone wanted to do something with its fresh foods business, which Bloomberg noted had been a drag on earnings. The company has seen better financial and brand growth by divesting pasta, beer, cookies and champagne brands; refocusing its portfolio on its core businesses of yogurt, water, plant-based products and specialized nutrition; and investing in healthy startups.
For Taylor Farms, the family-owned producer of salads and fresh foods acquires a local leader in organic salads and fresh, frozen and dried fruits and vegetables. The company said Earthbound Farm will join the Taylor Farms Retail Group and "help lead growth in the dynamic organic fresh produce category."
It seems to make more sense for produce companies to manage produce than huge CPG firms. As JPMorgan analyst Ken Golden put it in a 2017 research note, "The one-size-fits-all model that works in packaged food is harder to apply to newer, artisanal products, especially in the fresh aisles of the store."
Campbell Soup learned this lesson prior to its impending $510 million sale of Bolthouse Farms, a California-based producer of carrots, smoothies, juices and dressings it bought in 2012 for $1.55 billion. With the sale to an affiliate of Butterfly Equity announced this past week, Campbell has now sold off its entire Fresh division, whose value it had to write down four times since 2016. It's possible Bolthouse's fortunes will improve now that Jeff Dunn, an operating partner with Butterfly Equity and Bolthouse's former president and CEO, will again lead the company.
Danone may also look to divest other brands it acquired with its 2017 purchase of WhiteWave, but only time will tell. Danone Manifesto Ventures, the company's funding arm, has invested in startups producing items like water and organic baby food. Those stakes, plus new acquisitions in healthy drinks, snacks and alternative protein sources could help determine where the company decides to focus.
But Danone may choose to hang on to what it has. Mariano Lozana, CEO of Danone North America, recently told Food Dive the $6 billion company needs to keep reinventing itself from within in order to generate growth and attract customers.
"We need to follow the pockets of growth of where the consumer is," he said. "The consumer is moving to have very specific needs and for that, we believe you are better equipped in having a variety and broad spectrum of brands, a variety and broad spectrum of capabilities."